Wednesday, September 13, 2017

The Morning Call--US national debt hits $20 trillion

The Morning Call


The Market

The indices (DJIA 22118, S&P 2496) had another good day.  Volume rose and breadth remained strong.  Both remain above their 100 and 200 day moving averages and are in uptrends across all time frames.  The S&P is above the resistance offered by its former all-time high, though the Dow once again fell short. 

The VIX (10.6) was off fractionally, leaving it below the upper boundary of its short term downtrend, below its 100 day moving average (it reverted to resistance on two Friday’s ago, then traded back above it last Tuesday, back below it on Thursday, back above it on Friday and now is back below; so this MA is acting more like a magnet than resistance or support), below its 200 day moving average for a second day (if it remains there through the close on Thursday, it will revert to resistance) and below the lower boundary of a developing very short term uptrend. The question as to whether or not the VIX has bottomed clearly remains open.

The long Treasury fell slightly, but still finished above its 100 and 200 day moving averages (both support) and the lower boundaries of its short term trading range and its long term uptrend but below the resistance level marked by its August high.

The dollar was down, remaining in short term and very short term downtrends and below its 100 and 200 day moving averages and in a series of six lower lows.
GLD rose, ending above the lower boundaries of its short term and very short term uptrends and above its 100 and 200 day moving averages (both support).

Bottom line: long term, the indices remain strong viz a viz their moving averages and uptrends across all timeframes.  Short term, the Dow was again unable to close above the resistance level marked by its August high; but more important, all those Monday gap openings among the major indices still need to be closed.  Finally, the unambiguous performances of TLT, GLD and UUP continue to point at a weakening economy.

I continue to be uncomfortable with the overall technical picture.


            Yesterday was more quiet than Monday.  Two minor US datapoints: month to date retail sales grew slightly faster than in the prior week and the August small business optimism index was above forecasts.  Overseas, August UK CPI was a bit hotter than anticipated.

            We did get notice that the US national debt has reached $20 trillion, continuing to grow as a percent of GDP; in addition, the FY2017 deficit will be approximately $700 billion and continues to grow as a percent of government spending.

How the US got $20 trillion in debt (medium):

Bottom line: ‘the economy is….slowing and will be made worse not better by Harvey/Irma.  The Fed has…..inflated asset prices to obscene levels and the hurricanes will only make matters worse as they are likely to give Yellen et al the excuse they need to not do what ultimately has to be done---normalize monetary policy.   Of course, as long as the global central banks stay easy, the distortions in asset pricing and allocation can continue.  That is unless a flattening yield curve or a plunging dollar force the Fed to do the unthinkable.’

            Former BIS chief economist is concerned (short):

            My thought for the day: legendary John Bogle is quoted as saying “Betting on value is an intelligent way to own property as compared to trading in stocks.”  By that he meant that too many people speculate on price and very few focus on value.  Value is the future earnings from dividends discounted to the present.  Price is what investors are willing to pay today.  When those two numbers are at major variance, the smart investor takes advantage of the disparity.

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            Let the ball come to you.

    News on Stocks in Our Portfolios

   This Week’s Data

            Month to date retail chain store sales grew slightly faster than in the prior week.

            Weekly mortgage applications rose 9.9% while purchase applications were up 11.0%.
            August PPI was up 0.2% versus expectations of up 0.3%; ex food and energy, it was up 0.1% versus estimates of up 0.2%.


            Why the debt ceiling is a bad idea (medium):

            Counterpoint (medium):
            Update on the Chinese economy (medium):

            Home prices to median household income (short):

                Job openings increased slightly in July (short):



  International War Against Radical Islam

            Everybody seems to be shining the pistols (medium):

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